SG Private Equity (SG PE) is playing a significant role as a financial investor in South Korea’s Hanmi Pharmaceutical Group.
SG PE’s close relationship with Hanmi started in 2014 when the PE firm invested in Ofmom Company. Ofmom Company, 100 percent owned by Hanmi owner’s three children, was established to tap into new overseas markets. SG PE acquired Ofmom Company’s redeemable convertible preference shares (RCPS) worth 25 billion won ($20.2 million) and convertible bonds worth 25 billion won in 2014. The proceeds were used to build Ofmom Company’s new powdered formula factory in China.
Three years later the PE firm exited its investment in convertible bonds with Ofmom Company exercising its call options. In July 2018, SG PE sold RCPS to Ofmom Company’s affiliated company to fully exit its investments. The PE firm’s investment in Ofmom Company recorded an internal rate of return of 11.8 percent.
Ofmom Company started to seek a new business opportunity which can create synergies with its settled powdered formula business. At that time SG PE and Plutus Equity Partners’ acquisition of local luxury postnatal care center DeRAMA attracted Hanmi Science CEO Lim Chong-yoon’s attention. SG PE and Plutus took over DeRAMA through a 22.5 billion-won project fund, in which Lim participated as a strategic investor. Lim’s aim was to weigh the possibility of expanding DeRAMA’s business into China by helping the postnatal care center enter the Chinese market.
DeRAMA started its business in 2016 by leasing an entire floor of the Marriott Hotel in Beijing and is currently preparing to enter the Thai market. Ofmom Company has recently taken over DeRAMA from SG PE and Plutus to create strong synergies between its powdered formula business and the postnatal care business.
SG PE is likely to keep its close relationship with Hanmi considering it has repeatedly participated in the group’s new business as a financial investor. The PE firm is currently sitting on a large pile of cash, with the firm raising 500 billion won for its third blind-pool fund at the beginning of this year. (Reporting by Se-hun Jo)